The wave of capital replenishment among insurance companies shows no signs of slowing. Recently, the Beijing Financial Regulatory Bureau issued two administrative approvals in succession, granting Great Wall Life Insurance the go-ahead for a 3.5 billion yuan 10-year callable subordinated bond, while Beijing Life Insurance received approval for a 600 million yuan perpetual bond. According to incomplete statistics, nearly 20 insurers have obtained approval or completed the issuance of capital supplement bonds since the start of the year, with total volume surpassing 60 billion yuan by September 15. Notably, perpetual bonds now account for close to 70% of this total.

Perpetual bonds take center stage

Zhu Junsheng, a professor at Tsinghua University's PBC School of Finance and former head of its China Insurance and Pension Research Center, explained that issuing bonds to replenish capital offers the key advantages of preserving the existing equity structure and avoiding dilution of shareholder interests, all while swiftly boosting regulatory capital. This makes it an essential tool for insurers seeking to optimize capital structures and ease capital constraints, particularly for those aiming to support business growth without repeatedly tapping shareholder funds.

Looking at the issuance structure, a clear shift in capital supplement instruments is underway this year. In the first half alone, the industry issued 16 capital supplement bonds and perpetual bonds totaling 32.07 billion yuan, with perpetual bonds accounting for more than 60% at 19.34 billion yuan. By September, the share of perpetual bonds had climbed further to roughly 70%.

Beyond the latest approvals for Great Wall Life Insurance and Beijing Life Insurance, several other insurers have already completed or advanced their bond issuance plans this year. In the life insurance segment, PICC Life secured approval in July to issue 10 billion yuan in perpetual bonds, marking the largest single issuance of the year. New China Life completed a 10 billion yuan perpetual bond offering in July with an initial coupon rate of 1.90% for the first five years. CITIC Prudential Life has issued perpetual bonds in two tranches totaling 9 billion yuan, while Sunshine Life issued 5 billion yuan in capital supplement bonds—both ranking among the industry's top tier for the year.

"A notable characteristic of this year's bond issuance is the broadening of issuers, with a marked increase in participation from small and mid-sized insurers," noted a non-bank financial analyst at a securities firm. "In the past two years, issuance was dominated by large players with individual deal sizes often exceeding 10 billion yuan. This year, however, the vast majority of issuances are in the 5 billion yuan and below range, as many mid-sized companies with relatively short operating histories and solvency ratios near regulatory thresholds turn to bond issuance to shore up capital."

As interest rates in the bond market have trended downward overall, financing costs for insurers have steadily declined this year, with coupon rates visibly stepping down month by month. In the first half, coupon rates on insurer bonds ranged roughly between 2.05% and 2.98%. In the second half, the rate benchmark shifted further down: New China Life's perpetual bond coupon fell to 1.90% in July, and PICC Life's perpetual bond hit 1.88% in August with an oversubscription multiple of 3.43 times, setting new industry records twice within two months. By instrument type, perpetual bond coupons are concentrated in the 1.88% to 2.5% range, while traditional capital supplement bonds fall between 2.35% and 2.65%.

For Great Wall Life Insurance, its 1 billion yuan capital supplement bond issued in February carried a coupon rate of 2.54%. With the newly approved 3.5 billion yuan quota, market expectations suggest a lower issuance rate this time around. The analyst added, "At current rate levels, this is indeed a rare window for insurers needing long-term capital. In the past, five-year-plus insurance capital bonds typically yielded above 3.5%. Now, long-term funding can be secured at under 2%, representing a dramatic reduction in financial costs."

Rising capital constraints

Within the insurers' capital replenishment toolkit, equity capital increases remain an alternative path alongside bond issuance. However, this year has seen bond issuance emerge as the dominant channel, with the scale of equity raises trailing significantly behind. Yang Fan, general manager of Beijing PaiPaiWang Insurance Agency, commented that compared to equity expansion, bond issuance offers greater operational flexibility, avoids direct changes to existing shareholders' equity ratios, and, when regulatory conditions are met, can promptly supplement the corresponding tier of capital. Perpetual bonds that meet eligibility criteria can be counted as core Tier 2 capital, whereas capital supplement bonds primarily serve to bolster supplementary Tier 1 capital, allowing insurers to select instruments based on their solvency structures.

"Bond financing is not without costs—insurers must bear ongoing interest expenses and are subject to issuance conditions and market rate fluctuations," the analyst noted. "Equity increases, from shareholder decision to regulatory approval, often take more than half a year and involve complex steps such as share pricing and shareholder qualification reviews. Bond issuance, by contrast, follows a more standardized process. As long as solvency ratios are adequate and regulatory quotas are approved, the interbank market issuance cycle typically completes within one to two months, enabling rapid capital replenishment."

"For companies with dispersed equity structures or limited shareholder appetite for further investment, debt financing does not disturb the existing shareholder interest landscape or alter corporate control. This is particularly true for insurers anticipating changes at the shareholder level, making bond issuance the more pragmatic choice," said a veteran industry practitioner.

In practical terms, the demand for capital replenishment among insurers remains robust. With the full implementation of the second phase of the China Risk-Oriented Solvency System (C-ROSS), capital recognition standards have tightened and risk factors have been raised, effectively increasing capital requirements—especially for long-term equity investments and real estate assets, where risk capital charges have been significantly upgraded. Zhu Junsheng observed that the frequent capital injections this year do not signal a systemic solvency crisis across the industry, but rather reflect intensifying capital constraints facing the insurance sector. On one hand, long-term growth in life insurance business and asset allocation transitions continuously consume capital. On the other, falling interest rates compress investment returns, while riskier asset allocations such as equities demand more capital, all alongside increasingly stringent solvency supervision requirements on capital quality and buffers.

"Pressure from the business side is also a key factor. This year, the life insurance industry has shown strong growth momentum with rapid increases in new premiums, and business expansion inherently consumes capital. Notably, the rising share of protection-type products carries significantly higher capital consumption than savings-type products," the industry practitioner concluded.